Sobeys to close 50 stores, including five Calgary locations

CALGARY - Sobeys will close about 50 “underperforming” stores, the majority of them in Western Canada.

The national grocer announced Thursday that the company completed a detailed full review of its retail store network during the fourth quarter of its fiscal year 2014.

“This review aligns with management’s ongoing focus of enhancing the productivity and performance of the network and logically follows the acquisition of Canada Safeway which was completed in the third quarter of fiscal 2014,” it said in a news release.

“Based on this detailed review, Sobeys has determined that consistently underperforming retail stores, representing approximately 50 stores (1.5 million of total gross square footage) and 3.8 percent of the total retail network gross square footage, will close. Approximately sixty percent of the affected stores are located in Western Canada.”

The closures include four Sobeys and one Safeway operating in the Calgary.

The five Calgary locations include: Deer Point Sobeys and Fairmount Sobeys both scheduled to close on July 31; and London Town Sobeys, Douglas Square Sobeys and the Ogden/Glenmore Square Safeway, which will not close before the fall of 2014.

“For these three locations, we expect over the next six to eight weeks to share further details on an official date of closure with our employees and customers,” said John Graham, director of public affairs and government relations for the Safeway operations of Sobeys.

“After carefully considering a number of factors, we have made the difficult decision to permanently close these five Calgary stores that have been consistently underperforming and are no longer financially viable. Employees were advised of this decision yesterday.”

Shoppers at the London Town location Thursday had a mixed reaction to the news.

“I was kind of hoping to see Safeway become more like Sobeys,” said Leanne Musak, who works at nearby development firm Douglas Homes. Musak said Sobeys offers more in the way of organic fruits and vegetables and gluten-free items.

“Safeway has really bad produce. It’s not as fresh and they just don’t have the same selection.”

Alyssa Kulhavy, who stopped into the grocery store to buy a cake, agreed the produce is better at Sobeys but said she prefers the layout and pricing at Safeway.

“Their prices are expensive so I’m not surprised to hear some of their doors are now shutting,” she said.

Graham said it is difficult to provide specific numbers about employee reductions as many of the employees affected by this announcement will receive offers of employment in comparable jobs within the company’s store network.

“This is a process that will take some time, and should it be determined that opportunities are not available for some of our employees, then respectful severance compensation will be offered,” he said.

“Where applicable, we will be working with the relevant unions regarding all collective agreement language that applies to store closures. An average impacted store employs approximately 60 full and part-time employees, however… our intent is to minimize the impact on as many employees as possible.”

The company said the move will strengthen the quality of Sobeys’ store network and is expected to improve net earnings as a result of cost savings. But, it will also result in a reduction in future sales of about $400 million or 1.9 percent of total sales.

“The rationalization and restructuring costs associated with these store closures amount to $169.8 million and are included in selling and administrative expenses for the fourth quarter ended May 3, 2014,” it said. “This expense consists of $137.1 million for severance, site closing and other costs, $35.8 million associated with the write-down of property, equipment and intangible assets, and a $3.1 million reversal of straight-line lease provisions.”

Perry Caicco, an analyst with CIBC World Markets, said the closures will improve Sobeys’ earnings and ease the pressure on the whole market.

“Rapid square footage growth has crimped the Canadian market, and Sobeys has been the first to acknowledge that,” he said, adding that the closures will drop the 2014 industry national square footage growth from 2.4 per cent to 1.6 per cent.

Earlier this year, it was announced that Sobeys is selling 30 stores in Western Canada for about $430 million, including 15 locations to Overwaitea and 14 to Federated Co-operatives Ltd., under deals approved as part of a larger agreement with the Competition Bureau after Sobeys’ purchase of Canada Safeway last year.

Sobeys is based in Stellarton, N.S. along with parent company Empire Co. It owns or franchises more than 1,500 stores in all 10 provinces under retail banners that include Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods, and Lawton’s Drug Stores as well as more than 330 retail fuel locations.

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Sobeys to close 50 stores, including five Calgary locations

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